Abstract
The Russian Federation constituents differ not only in size and population but also in economic potential and, asa consequence, in the financial abilities to apply their budget authorities. The result is that the RF budget systemfeatures imbalances that are regulated at the federal level through equalisation transfer. This is associated withsuch principles of the RF budget system as unity and equality of budget laws. This paper describes the case studyof horizontal imbalance of the RF budget system being a result of economic disparity of the regions: the fiscalequalisation mechanism is described and appraised for its efficiency.
Highlights
The Russian Federation is the largest country in the world, which area is administratively divided in 85 regions, including over 23,000 municipalities
This paper describes the case study of horizontal imbalance of the RF budget system being a result of economic disparity of the regions: the fiscal equalisation mechanism is described and appraised for its efficiency
Fiscal Capacity Level (FCL) – the calculated fiscal capacity level prior to allocation of grants; TCI – the taxable capacity index being a relative assessment of the RF consolidated budget revenues, which determination is based on development and structure of tax base of an RF constituent; BEI – the budget expenditure index of an RF constituent being a relative assessment of the RF consolidated budget spending of such RF constituent on rendering equal fiscal services per capita, which determination is based on unbiased regional factors and conditions
Summary
The Russian Federation is the largest country in the world, which area is administratively divided in 85 regions, including over 23,000 municipalities. The regions significantly differ in their performance. This differentiation is primarily associated with historical allocation of tax base and political, economic and geographic, natural and climatic factors, as well as availability of human capital assets and production infrastructure. There is a significant difference between the Russian Federation constituents in terms of the Gross Regional Product. Over 35% of Gross Regional Product is produced in the Central Federal District, including Moscow with 22% and only 2.4% in the North Caucasian Federal District, where the share of the Republic of Ingushetia amounts to 0.06%. The difference of the RF constituents in their economic potential has an effect on budgeting and leads to a considerable disparity of their fiscal capacity
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